Saturday, June 28, 2008

MN-24-B : Honk For Tony Cornish

State Representative Tony Cornish (R-24-B) has the perfect vehicle for a rural legislator in perpetual campaign mode -- a Ford pick-up truck complete with an ample number of “Support the Troops” ribbons, a collection of decals that lets everyone know that he likes Ducks Unlimited, a placard with his picture and “Re-Elect Tony Cornish” on both side panels, and a single bumper sticker.

The bumper sticker is not a “John McCain for President, even though he is one of McCain’s original members of Team Minnesota.
The bumper sticker is not a “Dr. Brian Davis for Congress” as Cornish endorsed Randy Demmer.
The bumper sticker is not a “Coleman for Senate” … maybe he wants to drive the bus?
No, the bumper sticker says “HONK if you want to pay Higher Taxes”.

It’s great campaign rhetoric, but the wrong question is being asked.
It should say “HONK if you want FAIR Taxes”.

It’s not a question of whether any of us want to pay more taxes, but is the current tax system FAIR to all income groups ?

A quick look at Table 1-8 on page 20 and Table 2-2 on page 27 of the 2007 Minnesota Tax Incidence Study tells us that some are paying more and some are paying less. The study divided 2,363,258 households into ten equally weighted groups and then determined breakpoints by household incomes.

Group 1 Income of $10,175 and under Paid 19.3 % in taxes
Group 2 Income of $16,816 max paid 11.4 % in taxes
Group 3 $23,135 paid 10.9 %
Group 4 $29,766 paid 12.0 %
Group 5 $37,559 paid 12.6 %
Group 6 $47,192 paid 12.4 %
Group 7 $59,748 paid 12.3 %
Group 8 $76,437 paid 12.4 %
Group 9 $105,450 paid 12.4 %
Group 10 $105,451 and more paid 10.8 %
Overall the Total Group tax rate was 11.7 % meaning that because of the highest earners, the overall rate looks lower, but most of us are not in that income pool.

The Top 5 % (representing just 118,195 taxpayers) began income at $146,809 paid 10.4 % in taxes, while the Top 1 % (23,668 taxpayers) begain income at$354,758 paid only 9.3 % in taxes.

The obvious inference is that those with the greatest ability to pay actually contribute the least. Actually, there really isn’t any significant difference for most of us until the $100,000 threshold is reached … then the tax burden starts reducing.

Fair … you decide !

Will the next legislature address taxes ?
More than likely, but will it be any fairer ?
One group will most likely get a hearing is business since Governor Tim Pawlenty (R) has initiated a 21st CENTURY TAX REFORM COMMISSION. Business taxes contribute 22.6% to the State’s operating revenues, so if there is a reduction in business taxes, the funds will have to made up by somebody … or services cut.

The difference between taxpaying citizens and business is that taxpayers pay based on wages while a business pays based on profitibality ... its a fair system, unfortunately, with today's tight economy many businesses will be reporting lower profits (or even losses) ... the result is lower tax payments from the business component.

And will other operating costs go up …if you think about the price of gasoline in your vehicle, how do you think that price increase impacts all the state vehicles from snow plows to school buses.

Face it, the State is looking at difficult times ahead.
Will our legislators make changes that create a Fairer system ?

Let me offer one proposal that in and of itself would not be a tax increase but instead an elimination of a tax break. Currently, Minnesota Income Taxes follows the Federal Tax Code and allows contributions to retirement accounts (i.e. 401k) to be excluded from income, since it will be taxed when it is withdrawn. That would be fair if the monies are earned in Minnesota and the person spends their retirement years in Minnesota … if they move out of the state, then those deferred dollars might be taxable income in the other state …. in other words, Minnesota loses. The 2008 401K contribution limits for employee contributions is a maximum of $15,500 which many companies restrict to a maximum of 10% of wages. For example, if the wage was $40,000 then the max would be $4,000 deferred which may mean an additional $282 in taxes this year (but when the deferred dollars are used the full $4000 would not be taxable); if the wage was $354,758 then the maximum would be $15,500 or $1093 in increased tax payments. If you do not participate in a 401k plan, then there would be no impact. This small change would help the state now.

But one thing voters know about Representative Cornish is that he does not like taxes. His votes against the gas tax, the bonding bill and the omnibus tax bill indicate a strong support for the current system. Not necessarily a Fair Tax system but one that the affluent must appreciate.

I don’t know if Cornish will have any competition from the DFL, Independence or Green Parties, but this voter will be anxiously waiting to hear their tax policies.

In the meantime, I’m on the lookout for a bumper sticker for my Ford pick-up that says “HONK if you REJECT Tony Cornish”.

No comments: